Simpler tax regime on Sebi wish list

OUR BUREAU

U.K. Sinha in New Delhi on Saturday. (PTI)

New Delhi, June 21: To provide a boost to the capital markets, Sebi has asked the government to provide clarity on tax benefits for new products such as REITs (Real Estate Investment Trusts), Infrastructure Investment Trusts and debt securities.

“Sebi will soon finalise norms for REITs, but is awaiting clarity on taxation issues,” the Securities and Exchange Board of India (Sebi) chairman U.K. Sinha said here today, while adding that the regulator wants such trusts to get tax pass-through status.

Besides, Sebi is close to framing new rules for Infrastructure Investment Trusts but there needs to be clarity on withholding taxation issues for such products, Sinha said.

These new products would allow investors to invest in specific products linked to real estate projects and infrastructure projects, while providing the necessary safeguards.

Besides, these products would help corporate houses to raise significant amounts of capital for their projects.

Speaking at a conference here, Sinha said there were “certain anomalies in withholding tax on debt securities” and he hopes that the government would soon bring clarity and provide the tax pass-through status to REITs.

He said REITs were a significant vehicle for global investors and Indian markets could also tap this opportunity as Sebi was ready with the rules that would be announced once tax clarity was in place.

About the need to expand the corporate bond market, Sinha said necessary infrastructure for this was already in place and the related regulations had been simplified.

“I believe that an emerging market such as India must focus on development of the market. The Sebi act mandate is to work for growth of the market,” Sinha said.

The Sebi chairman further said there was a need to work on increasing the base of corporate bonds.

Sinha also stressed the need to encourage small and medium enterprises (SMEs) to get listed and get benefited from the capital markets.

At present, the listed SME market capitalisation in India stands at over Rs 7,500 crore, while 65 companies have got listed on SME Platform of exchanges.

“We have identified certain SME clusters to encourage listing. The government and Sebi are trying to help SMEs raise capital from the markets,” he said.

About the new regulations, Sinha said Sebi would soon put in place norms for crowdfunding, which would allow start-ups to tap new platforms to raise funds.

Besides, there are already norms in place for Alternative Investment Funds (AIFs) such as venture capital and angel investors.

Sebi came out with a discussion paper on REITs last year and according to the draft norms such trusts would be allowed to list on stock exchanges through an initial public offer (IPO) and they can raise funds further through follow-on offers.

“We are hoping that we will be able to implement it (REITs regulations) very soon. In developed markets such as the US, the UK, Singapore and Japan, the REITs have been a significant way for investors to take advantage of growth in the real estate industry,” Sinha said.

On one hand, these trusts allow investors to benefit from growth in the real estate industry, while they also help developers get the necessary funds, he added.

“Our rules are ready and we have told the government that these entities must be given a pass through status so far as the tax system is concerned.

“Sebi is hopeful that the government will consider it... Once there is clarity, we will be coming out with our regulations,” Sinha said.